Rehn cautious on Eurobond success

Olli Rehn, the European commissioner for economic and monetary affairs, has acknowledged that the introduction of Eurobonds will not be easy to achieve.

However, he said that Germany, which staunchly opposes the pooling of eurozone member states’ debt in this way, should sign up to the plan because it would be supported by “rock-solid” budget rules.

Angela Merkel, Germany’s chancellor, rejects the idea, which the Commission says would help lower struggling eurozone countries’ borrowing costs. But, speaking at a conference on Tuesday (10 January), Rehn said that the plan could “provide substantial benefits” for participating states.

“The potential advantages seem clear and large,” said Rehn. “Joint bonds would act as a driver of integration and efficiency of European bond markets. They could lower transaction costs and reduce government borrowing costs.”

He admitted, however, that there were “serious challenges to make them work”. Consequently, “provisions that ensure sustainable public finances and minimise the moral hazard”, allaying German fears, were paramount.

“It won’t be easy to achieve,” Rehn said at a debate organised by the Liberals in the European Parliament, adding that any move towards joint bonds would require much deeper economic and political integration.